ACC 290 Week 5 Final Exam

ACC 290 Week 5 Final Exam

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 ACC 290 Week 5 Final Exam
 

Question 1

The best definition of assets is the

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
resources belonging to a company that have future benefit to the company.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
cash owned by the company.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
collections of resources belonging to the company and the claims on these resources.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
owners’ investment in the business.
 

 

 

Question 2

Which of the following is not a liability?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Accounts Payable
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Accounts Receivable
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Unearned Service Revenue
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Interest Payable
 

 

 

Question 3

Which of the following financial statements is divided into major categories of operating, investing, and financing activities?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
The statement of cash flows.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
The retained earnings statement.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
The income statement.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
The balance sheet.
 

 

 

Question 4

Ending retained earnings for a period is equal to beginning

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Retained earnings + Net income + Dividends.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Retained earnings + Net income – Dividends.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Retained earnings – Net income + Dividends.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Retained earnings – Net income – Dividends.
 

 

 

Question 5

Which of the following is not an advantage of the corporate form of business organization?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
No personal liability
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Favorable tax treatment
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Easy to raise funds
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Easy to transfer ownership
 

 

 

Question 6

An advantage of the corporate form of business is that

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
its ownership is easily transferable via the sale of shares of stock.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
it is simple to establish.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
it has limited life.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
its owner’s personal resources are at stake.
 

 

 

Question 7

A small neighborhood barber shop that is operated by its owner would likely be organized as a

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
partnership.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
joint venture.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
corporation.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
proprietorship.
 

 

 

Question 8

If services are rendered for cash, then

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
liabilities will decrease.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
stockholders’ equity will decrease.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
assets will increase.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
liabilities will increase.
 

 

 

Question 9

A revenue generally

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
increases assets and stockholders’ equity.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
increases assets and decreases stockholders’ equity.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
leaves total assets unchanged.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
increases assets and liabilities.
 

 

 

Question 10

A revenue account

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
is increased by credits.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
has a normal balance of a debit.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
is increased by debits.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
is decreased by credits.
 

 

 

Question 11

Which accounts normally have debit balances?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Assets, expenses, and dividends
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Assets, expense, and retained earnings
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Assets, expenses, and revenues
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Assets, liabilities, and dividends
 

 

 

Question 12

In recording an accounting transaction in a double-entry system

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
the amount of the debits must equal the amount of the credits.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
there must only be two accounts affected by any transaction.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
the number of debit accounts must equal the number of credit accounts.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
there must always be entries made on both sides of the accounting equation.
 

 

 

Question 13

The usual sequence of steps in the transaction recording process is

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
journalize, analyze, post to the ledger.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
analyze, journalize, post to the ledger.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
journalize, post to the ledger, analyze.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
post to the ledger, journalize, analyze.
 

 

 

Question 14

Under the expense recognition principle expenses are recognized when

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
they are billed by the supplier.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
the invoice is received.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
they contribute to the production of revenue.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
they are paid.
 

 

 

Question 15

The revenue recognition principle dictates that revenue should be recognized in the accounting records:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
at the end of the month.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
in the period that income taxes are paid.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
when cash is received.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
when the performance obligation is satisfied.
 

 

 

Question 16

Merchandising companies that sell to retailers are known as

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
corporations.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
wholesalers.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
service firms.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
brokers.
 

 

 

Question 17

Gross profit equals the difference between

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
net income and operating expenses.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
sales revenue and cost of goods sold plus operating expenses.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
sales revenue and operating expenses.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
sales revenue and cost of goods sold.
 

 

 

Question 18

Net income will result if gross profit exceeds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
cost of goods sold.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
cost of goods sold plus operating expenses.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
purchases.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
operating expenses.
 

 

 

Question 19

Under the perpetual system, cash freight costs incurred by the buyer for the transporting of goods is recorded in which account?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Inventory
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Freight-In
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Freight-Out
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Freight Expense
 

 

 

Question 20

Financial information is presented below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses
 
$ 30000
Sales revenue
 
187000
Cost of goods sold
 
153000
 

The profit margin ratio would be

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
0.98.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
0.82.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
0.02.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
0.18.
 

 

 

Question 21

Financial information is presented below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses
$ 22000
Sales returns and allowances
5000
Sales discounts
5000
Sales revenue
150000
Cost of goods sold
108000
 

The gross profit rate would be

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
0.75.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
0.21.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
0.26.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
0.23.
 

 

 

Question 22

Financial information is presented below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses
$ 42000
Sales returns and allowances
3000
Sales discounts
8000
Sales revenue
140000
Cost of goods sold
98000
 

Gross Profit would be

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
$45000.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
$42000.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
$39000.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
$31000.
 

 

 

Question 23

The LIFO inventory method assumes that the cost of the latest units purchased are

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
the first to be allocated to ending inventory.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
the last to be allocated to cost of goods sold.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
the first to be allocated to cost of goods sold.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
not allocated to cost of goods sold or ending inventory.
 

 

 

Question 24

Which of the following statements is correct with respect to inventories

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
It is generally good business management to sell the most recently acquired goods first.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Under FIFO, the ending inventory is based on the latest units purchased.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
FIFO seldom coincides with the actual physical flow of inventory.
 

 

 

Question 25

All of the following are examples of internal control procedures except

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
using prenumbered documents.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
reconciling the bank statement.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
customer satisfaction surveys.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
insistence that employees take vacations.
 

 

 

Question 26

Each of the following is a feature of internal control except

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
recording of all transactions.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
separation of duties.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
an extensive marketing plan.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
bonding of employees.
 

 

 

Question 27

For which of the following errors should the appropriate amount be subtracted from the balance per books on a bank reconciliation?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Check written for $85, but recorded by the company as $58.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Deposit of $500 recorded by the bank as $50.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
A returned $100 check recorded by the bank as $10.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Check written for $93, but recorded by the company as $39.
 

 

 

Question 28

A check written by the company for $119 is incorrectly recorded by a company as $191. On the bank reconciliation, the $72 error should be

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
added to the balance per books.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
deducted from the balance per bank.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
deducted from the balance per books.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
added to the balance per bank.
 

 

 

Question 29

The following information was available for Concord Corporation at December 31, 2017: beginning inventory $95000; ending inventory $128000; cost of goods sold $620000; and sales $936000. Concord inventory turnover ratio (rounded) in 2017 was

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
6.5 times.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
8.4 times.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
5.6 times.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
4.8 times.
 

 

 

Question 30

The following information was available for Skysong, Inc. at December 31, 2017: beginning inventory $79000; ending inventory $106000; cost of goods sold $640000; and sales $832000. Skysong days in inventory (rounded) in 2017 was

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
52.9 days.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
60.8 days.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
40.6 days.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
45.1 days.
 

 

 
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